Creating competition for Indian Railways

As mentioned in the first part of this series, market competition is the best way to ensure autonomy of the Indian Railways. As far as freight trains are concerned, there is sufficient inter-modal competition to let Indian Railways decide freight tariffs.

In the case of passenger trains—and especially for long-distance travel—one has to think of creating intra-modal competition. And surely, there is no harm in having Indian Railways compete with private train operators for freight business as well.

According to the government’s own concept paper dated 1 January, “Investors have generally been shy of investing in an industry where far too much is still being done or controlled by government and the risk/return trade-off is not always favourable.” Private investors will enter the industry only if a level-playing field is guaranteed to them.

The structure of rail sector in India, as it exists today, certainly does not allow a level-playing field. Take, for instance, this statement made in the 2012 report of the High Level Safety Review Committee chaired by Anil Kakodkar: “The Railway Board has the unique distinction of being the rule maker, operator and the regulator, all wrapped into one.”

While a number of schemes have been framed over the years to encourage private participation, not much has materialized; the absence of an independent regulator being a very important reason. More info